Which of the following statements regarding the net profit margin ratio is false?
A)The numerator is net income.
B)The denominator is net sales or operating revenues.
C)It measures how much of every sales dollar is gross profit.
D)Financial analysts expect well-run businesses to maintain or improve their profit margin over time.

Question

Quizplus · Accepted Answer

The net profit margin ratio measures the percentage of each dollar of sales that results in net income after all expenses are paid. Therefore, statement C is false as it states that it measures how much of every sales dollar is gross profit, which is not correct.

Which of the Following Statements Regarding the Net Profit Margin